William Baumol Explained

William Baumol
School Tradition:Neo-Keynesian economics
Birth Name:William Jack Baumol
Birth Date:26 February 1922
Birth Place:New York City, U.S.
Death Place:New York City, U.S.
Field:Microeconomics, industrial organization, entrepreneurship
Alma Mater:College of the City of New York (B.Sc. 1942)
London School of Economics (Ph.D. 1949)
Doctoral Advisor:Lionel Robbins
Doctoral Students:Lionel W. McKenzie
William G. Bowen
Burton Malkiel
Harold Tafler Shapiro[1]
Influences:Joseph Schumpeter
Arthur Pigou
John Maynard Keynes
Contributions:Baumol–Tobin model
Baumol's cost disease
Contestable market theory
Sales revenue maximization model
Repec Prefix:e
Repec Id:pba92

William Jack Baumol (February 26, 1922 – May 4, 2017) was an American economist. He was a professor of economics at New York University, Academic Director of the Berkley Center for Entrepreneurship and Innovation, and Professor Emeritus at Princeton University. He was a prolific author of more than eighty books and several hundred journal articles.[2] He is the namesake of the Baumol effect.

Baumol wrote extensively about labor market and other economic factors that affect the economy. He also made significant contributions to the theory of entrepreneurship and the history of economic thought. He is among the most influential economists in the world according to IDEAS/RePEc. He was elected a Fellow of the American Academy of Arts and Sciences in 1971,[3] the American Philosophical Society in 1977,[4] and the United States National Academy of Sciences in 1987.[5]

Baumol was considered a candidate for the Nobel Prize in Economics for 2003,[6] and Thomson Reuters cited him as a potential recipient in 2014,[7] but he died without receiving the prize.

Early life

Baumol was born in the South Bronx. His parents, Solomon and Lillian, were both immigrants from Eastern Europe.[8]

Baumol studied at the City College of New York and was awarded his bachelor's degree in 1942. After college, he served in the U.S. Army in World War II and later worked for the Department of Agriculture as an economist.[8] [9]

Education

He was initially denied entry to the doctoral studies at the London School of Economics and was instead admitted to the Master's program. After impressing onlookers with his debating skills at Lionel Robbins' seminars, he was within weeks switched to the doctoral program and also admitted to the faculty as an Assistant Lecturer.[10]

Teaching

While a professor at Princeton University he supervised some graduate students who would eventually become very well-known economists, including Burton Malkiel, William G. Bowen, and Harold Tafler Shapiro.

Research

Among his better-known contributions are the theory of contestable markets, the Baumol-Tobin model of transactions demand for money, Baumol's cost disease, which discusses the rising costs associated with service industries, Baumol's sales revenue maximization model[11] and Pigou taxes.[12] [13] His research on environmental economics[14] recognized the fundamental role of non-convexities in causing market failures.[15]

William Baumol also contributed to the transformation of the field of finance, and published contributions to the areas of efficiency of capital markets, portfolio theory, and capital budgeting.[16]

Entrepreneurship

The place of the disruptive innovations and innovative entrepreneurs in traditional economic theory (which describes many efficiency-based ratios assuming uniform outputs) presents theoretic quandaries. Baumol contributed greatly to this area of economic theory. The 2006 Annual Meetings of the American Economic Association held a special session in his name, and honoring his many years of work in the field of entrepreneurship and innovation,[17] where 12 papers on entrepreneurship were presented.[18]

The Baumol Research Centre for Entrepreneurship Studies at Zhejiang Gongshang University is named after William Baumol.

In 2003, Baumol received the Global Award for Entrepreneurship Research[19] "[f]or his persistent effort to give the entrepreneur a key role in mainstream economic theory, for his theoretical and empirical studies of the nature of entrepreneurship, and for his analysis of the importance of institutions and incentives for the allocation of entrepreneurship."[20]

The British news magazine, The Economist published an article about William Baumol and his lifelong work to develop a place in economic theory for the entrepreneur (March 11, 2006, pp 68), much of which owes its genesis to Joseph Schumpeter. They note that traditional microeconomic theory normally holds a place for 'prices' and 'firms' but not for that (seemingly) important engine of innovation, the entrepreneur. Baumol is given credit for helping to remedy this shortcoming: "Thanks to Mr. Baumol's own painstaking efforts, economists now have a bit more room for entrepreneurs in their theories."

William Baumol's book, The Microtheory of Innovative Entrepreneurship[21] is the first formal theoretical analysis of the role of innovative entrepreneurs.

Textbooks

Baumol wrote several textbooks in economics, including an introductory textbook with Alan Blinder titled Macroeconomics: Principles and Policy.[22] His economics textbook on operations research was internationally well-received:

In the 1960s and 1970s, nearly every economics department offered a course in operations research methods in economics, and the usual textbook used was Economic Theory and Operations Analysis by W. J. Baumol. An entire generation of economics students was familiar with this book ....[23]

Professional and philanthropic interests

Baumol was a trustee of Economists for Peace and Security. Baumol was known for his interests in the economics of art, including the economics of the performing arts.

Death

Baumol died on May 4, 2017, at the age of 95.[24] [25]

Major publications

Positions and awards

See also

External links

Notes and References

  1. Krueger. Alan. An Interview with William J. Baumol. Journal of Economic Perspectives. 15. 2001. 3 . 211–231 [215]. 10.1257/jep.15.3.211. free.
  2. Web site: Guide to the William J. Baumol Papers. February 3, 2013.
  3. Web site: Book of Members, 1780–2010: Chapter B. American Academy of Arts and Sciences. May 28, 2011.
  4. Web site: APS Member History . 2022-07-18 . search.amphilsoc.org.
  5. Web site: William J. Baumol . 2022-07-18 . www.nasonline.org.
  6. Web site: Nobel Prize Winners in Economics Profiles Index. February 3, 2013.
  7. Web site: Thomson Reuters Predicts 2014 Nobel Laureates, Researchers Forecast for Nobel Recognition. April 13, 2016.
  8. News: Cohen . Patricia . William J. Baumol, 95, 'One of the Great Economists of His Generation,' Dies . The New York Times . 2017-05-10.
  9. Krueger . Alan . An Interview With William J Baumol . Journal of Economic Perspectives . 15 . 2001. 3 . 211–231 . 10.1257/jep.15.3.211 . free .
  10. Krueger. Alan. An Interview with William J. Baumol. Journal of Economic Perspectives. 15. 2001. 3 . 211–231 [214]. 10.1257/jep.15.3.211. free.
  11. Book: Business Behavior, Value and Growth. https://archive.org/details/businessbehavior0000baum_v0a8. registration. William J.. Baumol . 1959. Macmillan. New York. 7.
  12. Baumol . W. J. . 1972 . On Taxation and the Control of Externalities . American Economic Review . 62 . 3 . 307–322 . 1803378.
  13. William J. Baumol: An Entrepreneurial Economist on the Economics of Entrepreneurship. Eliasson, Gunnar . Magnus Henrekson. amp . 2004. Small Business Economics. 23. 1. 1–7. October 14, 2013. 10.1023/b:sbej.0000026049.86377.df. 154386348 . 10419/56238. free.
  14. Book: The Theory of environmental policy. Second. William J.. Baumol . Oates. Wallace E.. 978-0-521-31112-0. 1988. x+299. Cambridge University Press. Cambridge. with contributions by V. S. Bawa and David F. Bradford. 8 Detrimental externalities and nonconvexities in the production set.
  15. Guesnerie. Roger. Roger Guesnerie. Pareto optimality in non-convex economies. Econometrica. 43. 1975. 1 . 1–29 [2]. 10.2307/1913410. 443877 . 1913410. with News: Guesnerie. Roger. Errata-->. Econometrica . 43. 1975. 5–6. 1010. 10.2307/1911353. 443878 . 1911353.

    Page 73 (and for other contributions of Baumol pages 42, 68, and 155): Book: Starrett, David A.. Foundations of public economics. Cambridge economic handbooks. 1988. Cambridge University Press. Cambridge. 978-0-521-34801-0.

    Non-convexities also appear in Baumol's theory of contestable markets: Pages 179–181: Book: Salanié, Bernard. Microeconomics of market failures. English translation of the (1998) French Microéconomie: Les défaillances du marché (Economica, Paris). 2000. MIT Press. Cambridge, MA. 978-0-262-19443-3.

    page 88: Book: Laffont, Jean-Jacques. Jean-Jacques Laffont. 1988. 3 Nonconvexities . Fundamentals of public economics. https://archive.org/details/fundamentalsofpu0000laff. MIT. 978-0-262-12127-9. registration.

  16. Book: Chapter 11, William Baumol and the Development of the Field of Finance, in Prices, Competition and Equilibrium: Essays in Honour of William J Baumol. Burton. Malkiel . 1986. Oxford. 11 . 9780860030690. https://books.google.com/books?id=GqAOisFfgYYC&q=William+Baumol+and+the+Development+of+the+Field+of+Finance%2C+in+Prices%2C+Competition+and+Equilibrium&pg=PA214 .
  17. News: Searching for the invisible man . The Economist . 67 . Mar 9, 2006 . 23 December 2012 .
  18. Web site: Annual meeting allied social science associations. 2006 ASSA Conference. The American Economic Association. January 8, 2006. August 5, 2011.
  19. The Global Award for Entrepreneurship Research. Magnus Henrekson . Anders Lundstrom . Small Bus Econ. 2009. 1. 1–14. 10.1007/s11187-008-9141-y. 32. 10265169. free.
  20. Web site: 2003 Award Winner William J. Baumol. May 2003. Global Award for Entrepreneurship Research. August 5, 2011.
  21. Book: The Microtheory of Innovative Entrepreneurship. May 2010. Princeton University Press. 9780691145846.
  22. Web site: Macroeconomics: Principles and Policy. 2012. Cengage.
  23. Book: Computational Economics: Economic Modeling with Optimization Software . Thompson. Gerald L.. Gerald L. Thompson. Thore. Sten. 0894262017. 1992. Scientific Press. South San Francisco, California. xii+352 [vii].
  24. Web site: William Baumol, whose famous economic theory explains the modern world, has died. Vox. May 4, 2017. May 4, 2017. Timothy B. Lee.
  25. News: William Baumol, economist who found logic in rising health-care prices, dies at 95 - The Washington Post. The Washington Post.

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